thai beverage singapore add (no change) consensus · pdf filedistributors to stock up prior to...

14
BrewersSingaporeJuly 6, 2017 Company Note IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH. Powered by the EFA Platform Thai Beverage Impending excise tax hike does not faze us We retain our view that any near-term consumption weakness from the mourning period or impending tax hike (to be implemented in Sep 2017) is temporary. Historical evidence shows no prolonged volume impact from excise tax hikes. Instead, there could be margin upside potential if Thaibev raises ASPs beyond the excise tax hike. We also met F&N recently and we like its regional expansion ambitions. This fits in perfectly with Thaibev’s planned transformation into a regional beverage player. Reiterate Add with an unchanged TP of S$1.07. Mourning period dampener on share price only temporary Thaibev’s share price took a beating after its 2QFY17 results disappointed, with net profit falling 23% yoy. However, the share price has somewhat recovered since. We had always taken the view that Thaibev was merely facing mini headwinds due to the mourning period and we expect consumption to normalise over time. Near-term hurdles the group will need to contend with include 1) still weak consumption from the mourning period, and 2) the excise tax hike. We believe these concerns are temporary, if any. Excise tax hike should not be a concern A recent grumble we have been hearing is whether the latest excise tax (to be implemented in Sep 2017) will result in weaker volumes. Note that the magnitude and exact details of the new excise tax have yet to be announced. Nonetheless, our analysis of tax hikes on Thaibev’s sales volumes over the last decade shows that tax hikes do not necessarily result in a drop in volumes. Even if they do, volume declines are never sustained over a prolonged period and volumes eventually recover. Possible margin improvement from excise hike Instead, the excise hike could have a silver lining in the form of improved margins. We find that previous excise hikes even led to some margin improvement. This is because Thaibev typically tries to take advantage of any excise hikes and raise ASPs beyond the tax hike. Our current assumptions are for spirits gross margins to remain flat in FY17F, which we believe should be easily achieved. F&N to be the vehicle for Thaibev’s regional expansion plan In our earlier report (link here), we discussed the merits and our base case assumption of F&N being the entity used to acquire assets outside of Thailand. We recently caught up with F&N’s management, and a key takeaway was that F&N confirmed our view that Thaibev will use F&N to grow the non-Thai business. We like the regional expansion story and expect F&N to be among the bidders for Sabeco, and to also gradually increase its Vinamilk stake (now at 18.74%). What are the potential catalysts? We believe the stock could re-rate further from corporate actions, including: 1) finalisation of F&N/FCL corporate restructuring, and 2) M&As in Vietnam. In its home market (Thailand), market share gains in beer could also drive the share price. Accordingly, we reiterate our Add call with an unchanged SOP-based TP of S$1.07. Risks: weaker margins if excise tax hike is not passed on or weak consumption. SOURCE: COMPANY DATA, CIMB FORECASTS Singapore ADD (no change) Consensus ratings*: Buy 11 Hold 1 Sell 1 Current price: S$0.91 Target price: S$1.07 Previous target: S$1.07 Up/downside: 18.1% CIMB / Consensus: 3.7% Reuters: TBEV.SI Bloomberg: THBEV SP Market cap: US$16,428m S$22,725m Average daily turnover: US$13.49m S$18.77m Current shares o/s: 25,110m Free float: 32.2% *Source: Bloomberg Key changes in this note No change. Source: Bloomberg Price performance 1M 3M 12M Absolute (%) 2.3 -4.7 -3.7 Relative (%) 2 -7 -17.1 Major shareholders % held Siriwana Company Ltd 45.3 MM Group Ltd 20.6 Capital Group Companies 17.2 Analyst(s) Jonathan SEOW T (65) 6210 8671 E [email protected] Financial Summary Dec-15A Sep-16A Sep-17F Sep-18F Sep-19F Revenue (THBm) 172,049 139,153 195,517 206,152 217,470 Operating EBITDA (THBm) 27,592 22,676 33,202 35,928 37,658 Net Profit (THBm) 26,464 18,920 26,276 28,478 29,810 Core EPS (THB) 0.90 0.75 1.05 1.13 1.19 Core EPS Growth 4.2% (16.3%) 38.9% 8.4% 4.7% FD Core P/E (x) 24.73 29.56 21.29 19.64 18.76 DPS (THB) 0.61 0.60 0.63 0.68 0.71 Dividend Yield 2.74% 2.69% 2.82% 3.05% 3.20% EV/EBITDA (x) 19.13 23.18 15.57 14.11 13.19 P/FCFE (x) 32.54 28.52 24.29 22.00 20.88 Net Gearing 34.2% 33.2% 24.0% 15.4% 7.6% P/BV (x) 4.83 4.66 4.28 3.94 3.63 ROE 20.8% 16.0% 21.0% 20.9% 20.2% % Change In Core EPS Estimates 0% 0% 0% CIMB/consensus EPS (x) 1.00 0.99 0.96 73.0 88.0 103.0 118.0 0.800 0.900 1.000 1.100 Price Close Relative to FSSTI (RHS) 50 100 150 Jul-16 Oct-16 Jan-17 Apr-17 Vol m

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Page 1: Thai Beverage Singapore ADD (no change) Consensus · PDF filedistributors to stock up prior to any potential excise hikes. This makes sense ... F&N currently has an 18.74% stake in

Brewers│Singapore│July 6, 2017

Company Note

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

Powered by the EFA Platform

Thai Beverage Impending excise tax hike does not faze us ■ We retain our view that any near-term consumption weakness from the mourning

period or impending tax hike (to be implemented in Sep 2017) is temporary. ■ Historical evidence shows no prolonged volume impact from excise tax hikes. ■ Instead, there could be margin upside potential if Thaibev raises ASPs beyond the

excise tax hike. ■ We also met F&N recently and we like its regional expansion ambitions. This fits in

perfectly with Thaibev’s planned transformation into a regional beverage player. ■ Reiterate Add with an unchanged TP of S$1.07.

Mourning period dampener on share price only temporary Thaibev’s share price took a beating after its 2QFY17 results disappointed, with net profit falling 23% yoy. However, the share price has somewhat recovered since. We had always taken the view that Thaibev was merely facing mini headwinds due to the mourning period and we expect consumption to normalise over time. Near-term hurdles the group will need to contend with include 1) still weak consumption from the mourning period, and 2) the excise tax hike. We believe these concerns are temporary, if any.

Excise tax hike should not be a concern A recent grumble we have been hearing is whether the latest excise tax (to be implemented in Sep 2017) will result in weaker volumes. Note that the magnitude and exact details of the new excise tax have yet to be announced. Nonetheless, our analysis of tax hikes on Thaibev’s sales volumes over the last decade shows that tax hikes do not necessarily result in a drop in volumes. Even if they do, volume declines are never sustained over a prolonged period and volumes eventually recover.

Possible margin improvement from excise hike Instead, the excise hike could have a silver lining in the form of improved margins. We find that previous excise hikes even led to some margin improvement. This is because Thaibev typically tries to take advantage of any excise hikes and raise ASPs beyond the tax hike. Our current assumptions are for spirits gross margins to remain flat in FY17F, which we believe should be easily achieved.

F&N to be the vehicle for Thaibev’s regional expansion plan In our earlier report (link here), we discussed the merits and our base case assumption of

F&N being the entity used to acquire assets outside of Thailand. We recently caught up with F&N’s management, and a key takeaway was that F&N confirmed our view that Thaibev will use F&N to grow the non-Thai business. We like the regional expansion story and expect F&N to be among the bidders for Sabeco, and to also gradually increase its Vinamilk stake (now at 18.74%).

What are the potential catalysts? We believe the stock could re-rate further from corporate actions, including: 1) finalisation of F&N/FCL corporate restructuring, and 2) M&As in Vietnam. In its home market (Thailand), market share gains in beer could also drive the share price. Accordingly, we reiterate our Add call with an unchanged SOP-based TP of S$1.07. Risks: weaker margins if excise tax hike is not passed on or weak consumption.

SOURCE: COMPANY DATA, CIMB FORECASTS

Singapore

ADD (no change) Consensus ratings*: Buy 11 Hold 1 Sell 1

Current price: S$0.91

Target price: S$1.07

Previous target: S$1.07

Up/downside: 18.1%

CIMB / Consensus: 3.7%

Reuters: TBEV.SI

Bloomberg: THBEV SP

Market cap: US$16,428m

S$22,725m

Average daily turnover: US$13.49m

S$18.77m

Current shares o/s: 25,110m

Free float: 32.2% *Source: Bloomberg

Key changes in this note

No change.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 2.3 -4.7 -3.7

Relative (%) 2 -7 -17.1

Major shareholders % held Siriwana Company Ltd 45.3 MM Group Ltd 20.6 Capital Group Companies 17.2

Analyst(s)

Jonathan SEOW

T (65) 6210 8671 E [email protected]

Financial Summary Dec-15A Sep-16A Sep-17F Sep-18F Sep-19F

Revenue (THBm) 172,049 139,153 195,517 206,152 217,470

Operating EBITDA (THBm) 27,592 22,676 33,202 35,928 37,658

Net Profit (THBm) 26,464 18,920 26,276 28,478 29,810

Core EPS (THB) 0.90 0.75 1.05 1.13 1.19

Core EPS Growth 4.2% (16.3%) 38.9% 8.4% 4.7%

FD Core P/E (x) 24.73 29.56 21.29 19.64 18.76

DPS (THB) 0.61 0.60 0.63 0.68 0.71

Dividend Yield 2.74% 2.69% 2.82% 3.05% 3.20%

EV/EBITDA (x) 19.13 23.18 15.57 14.11 13.19

P/FCFE (x) 32.54 28.52 24.29 22.00 20.88

Net Gearing 34.2% 33.2% 24.0% 15.4% 7.6%

P/BV (x) 4.83 4.66 4.28 3.94 3.63

ROE 20.8% 16.0% 21.0% 20.9% 20.2%

% Change In Core EPS Estimates 0% 0% 0%

CIMB/consensus EPS (x) 1.00 0.99 0.96

73.0

88.0

103.0

118.0

0.800

0.900

1.000

1.100

Price Close Relative to FSSTI (RHS)

50

100

150

Jul-16 Oct-16 Jan-17 Apr-17

Vo

l m

Page 2: Thai Beverage Singapore ADD (no change) Consensus · PDF filedistributors to stock up prior to any potential excise hikes. This makes sense ... F&N currently has an 18.74% stake in

Brewers│Singapore│Thai Beverage│July 6, 2017

2

Impending excise tax hike does not faze us

Excise hike impact

New excise tax calculation in Sep 2017

The latest update is that a new excise tax calculation will be implemented from Sep 2017. Apart from the indicated timeline, we also know that the latest excise tax calculation will be changed from wholesale price (i.e. ex-factory price) to retail price. However, the finer details are not yet known and the exact impact is not clear. We understand that management is also awaiting further details from the authorities before it makes any market adjustments (excise hikes are typically passed on to consumers in the form of higher ASPs).

Figure 1: Current excise tax calculation; this is set to change in Sep 2017

SOURCE: COMPANY PRESENTATION SLIDES

Excise hike unlikely to have any meaningful negative impact

That said, common concerns surrounding excise tax hikes are typically twofold: 1) drop in volumes, or 2) drop in margins. Overall, we do not find any concrete data points to support either argument.

On the drop in volumes, we do not find strong evidence to suggest that excise hikes necessarily result in a drop in volumes. Over the past 10 years, there have been four excise hikes, of which two hikes were followed by yoy volume declines while the other two hikes did not. Our analysis shows that even if volumes see a negative impact in the immediate 1-2 quarters, these are never sustained over a prolonged period and volumes eventually recover.

On the ground, our channel checks indicate that the natural behaviour is for distributors to stock up prior to any potential excise hikes. This makes sense since distributors want to lock in lower prices. Accordingly, we could see a similar uptick in volumes from channel stocking in 3Q/4QFY17.

Page 3: Thai Beverage Singapore ADD (no change) Consensus · PDF filedistributors to stock up prior to any potential excise hikes. This makes sense ... F&N currently has an 18.74% stake in

Brewers│Singapore│Thai Beverage│July 6, 2017

3

Figure 2: Quarterly trend of Thaibev's spirit volumes

SOURCES: CIMB, COMPANY REPORTS

On the drop in margins, the concern is whether the excise tax hike will erode margins. However, we believe this is unlikely (see Figure 3). Further, the company typically fully passes on any cost hikes, which we think Thaibev is partly able to do because of its dominant spirits market share (c.90%). In fact, gross margins could even improve as the company typically tries to take advantage of any excise hikes and raise ASPs beyond the excise tax hike.

Figure 3: Thaibev's spirit gross margin trend

SOURCES: CIMB, COMPANY REPORTS

Title:

Source:

Please fill in the values above to have them entered in your report

-4%-4%-4%

-12%-12%

-5%

2%

7%

18%

13%

7% 8%

2% 3%

8%

14%

3%

11%10%

3%

11%9%

6%

-10%

-5%

-11%

5%6%

1%2%

-12%

7%

11%

-4%

0%-2%

4% 5%

-2%

-11%

-4%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

80

130

180

230

280

1Q

17

2Q

07

3Q

07

4Q

07

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08

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08

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08

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09

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1Q

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1Q

17

Thaibev's spirit volumes (m litres)

yoy growth (%)

Based

on CY

excise

hikeexcise

hike

excise

hike

excise

hike

Title:

Source:

Please fill in the values above to have them entered in your report

35.9%

34.4%34.7%

31.9%32.2%

34.8%

32.2%

32.9% 33.0% 33.1%

29.0%

30.0%

31.0%

32.0%

33.0%

34.0%

35.0%

36.0%

37.0%

CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 FY16

Spirit gross margins

excise

hike

excise

hike

excise

hikeexcise

hike

Page 4: Thai Beverage Singapore ADD (no change) Consensus · PDF filedistributors to stock up prior to any potential excise hikes. This makes sense ... F&N currently has an 18.74% stake in

Brewers│Singapore│Thai Beverage│July 6, 2017

4

How F&N fits into the Thaibev picture

Recap that Thaibev had communicated its intentions to complete the much awaited F&N/FCL corporate restructuring by Sep 2017. As of today, Thaibev still holds c.28% stakes in both F&N and FCL, and details surrounding the exact nature of the restructuring still remain murky. In an earlier report (titled: F&N/FCL restructuring to propel the group into a regional beverage play), we explored several potential outcomes and we retain our view that most likely, Thaibev will first divest FCL and use the proceeds to enlarge its stake in F&N.

We caught up with F&N’s management recently. They could not share much on the potential restructuring but we summarise our key takeaways here:

F&N currently has an 18.74% stake in Vinamilk and has openly declared its intentions to increase this further. However, it will not overpay for Vinamilk in the open market and the ideal scenario would be to buy a bigger stake from SCIC (the state government which still holds a c.36% stake). The timing of such a share sale remains unknown.

F&N has also expressed its ambitions and interest in Vietnamese beer assets, primarily Sabeco. The management shared nothing on the potential valuation multiples it is willing to pay.

F&N’s latest net gearing stands at c.3%, and it is comfortable to raise this further should there be M&A opportunities. Between Sabeco and Vinamilk, we understand F&N can comfortably acquire either one of the assets but would likely have to tap equity markets if both targets were to become available at the same time.

We read F&N’s plans to acquire assets in Vietnam as confirming our base case assumption that Thaibev will use F&N to acquire assets outside of Thailand.

Figure 4: F&N's shareholding structure Figure 5: FCL's shareholding structure

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

Title:

Source:

Please fill in the values above to have them entered in your reportFree float

59.3%28.5%

12.2%

Title:

Source:

Please fill in the values above to have them entered in your reportFree float

59.1%28.4%

12.5%

Page 5: Thai Beverage Singapore ADD (no change) Consensus · PDF filedistributors to stock up prior to any potential excise hikes. This makes sense ... F&N currently has an 18.74% stake in

Brewers│Singapore│Thai Beverage│July 6, 2017

5

Valuation and recommendation

Focus on the longer-term thesis and not the near-term volatility

Thaibev’s share price took a beating post a weak set of 2QFY17 results where net profit fell 23% yoy. However, share price has since somewhat recovered. We had always taken the view that Thaibev was merely facing mini headwinds due to the mourning period and we expect consumption to normalise over time. Accordingly, we are not surprised that share price has rebounded. In fact, we will not be overly concerned even if 3QFY17 results are not particularly strong as we believe the slower consumption is only temporary and due to the mourning period. Going forward, we see any pullback in the share price as an opportunity to accumulate.

We believe in the group’s long-term transformation into a regional beverage play, and believe this will drive share price outperformance in the long run. Re-rating catalysts include M&As/corporate restructuring.

Figure 6: Thaibev's share price has recovered from its low after weak 2QFY17 results; up 8% since

SOURCES: CIMB, BLOOMBERG

Our SOP-based target price of S$1.07 remains unchanged, with the group’s spirits business still forming the majority (c.70%) of our TP. Our TP is made up of the following:

Figure 7: Thaibev’s SOP valuation

SOURCE: CIMB

Title:

Source:

Please fill in the values above to have them entered in your report

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

Jan

-15

Fe

b-1

5

Ma

r-1

5

Apr-

15

Ma

y-15

Jun

-15

Jul-1

5

Aug

-15

Sep

-15

Oct-

15

Nov-1

5

Dec-1

5

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-16

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b-1

6

Ma

r-1

6

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16

Ma

y-16

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-16

Jul-1

6

Aug

-16

Sep

-16

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16

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Dec-1

6

Jan

-17

Fe

b-1

7

Ma

r-1

7

Apr-

17

Ma

y-17

Jun

-17

Jul-1

7

THBEV share price (S$)

4Q15 results:Chang's market share rose to 38% (up from 30%)

1Q16 results:Chang's market share rose

further to 40%

Concerns regarding mourning period

Strong results:Group net profit +28% yoy

Weak results:Group net profit -23% yoy

Parts Basis

FY17 net

profit

Implied P/E

multiple

Value

(THB b)

Spirits DCF 20 24.4 511

Beer DCF 4 29.2 127

Non-al (Oishi) Stock market value (79.66% stake) 22

Non-al (Sermsuk) Stock market value (64.66% stake) 9

F&N Stock market value (28.53% stake) 23

FCL Stock market value (28.44% stake) 33

Net Debt/(Cash) End CY17 32

Minority interests End CY17 4

Equity value (THB b) MVE = EV - Net debt - MI 688

Shares outstanding (b) 25.1

Implied per share value (S$) 1.07

Implied CY17 P/E based on TP 25.7

Implied CY18 P/E based on TP 23.9

Page 6: Thai Beverage Singapore ADD (no change) Consensus · PDF filedistributors to stock up prior to any potential excise hikes. This makes sense ... F&N currently has an 18.74% stake in

Brewers│Singapore│Thai Beverage│July 6, 2017

6

Figure 8: Peers Comparison

SOURCES: CIMB, COMPANY REPORTS

Figure 9: ThaiBev's historical forward P/E trading band

SOURCES: CIMB, COMPANY REPORTS

Bloomberg Price

Target

Price

Market

Cap Core P/E (x) 2-year EPS

EV/EBITD

A (x)

Recurring

ROE (%)

Dividend

Yield (%)

Company Ticker Recom. (lcl curr) (lcl curr) (US$ m) CY17F CY18F CAGR (%) CY18F CY17F CY17F

Thai Beverage THBEV SP ADD 0.91 1.07 16,519 21.0 19.5 7.7% 14.0 20.8 2.9

Beer

Anheuser-Busch InBev SA/NV ABI BB NR 95.8 NA 219,825 25.0 21.6 164.1% 14.3 11.9% 3.5%

Carlsberg A/S CARLB DC NR 680.0 NA 15,809 20.6 18.9 10.6% 9.4 9.4% 1.8%

Heineken NV HEIA NA NR 84.9 NA 55,545 21.6 19.6 26.7% 10.4 17.1% 1.7%

Carlsberg Brewery (M) CAB MK Hold 15.1 14.80 1,079 20.0 18.4 6.7% 13.1 71.5% 5.0%

Heineken Malaysia Bhd HEIM MK Hold 18.5 18.38 1,300 18.6 17.3 30.7% 12.2 74.3% 5.2%

Asahi Group Holdings Ltd 2502 JP NR 4,318.0 NA 18,409 18.1 15.9 17.9% 12.1 12.6% 1.5%

Kirin Holdings Co Ltd 2503 JP NR 2,332.0 NA 18,791 17.9 21.9 -9.4% 11.4 16.7% 1.7%

Sapporo Holdings Ltd 2501 JP NR 3,095.0 NA 2,150 21.8 19.8 13.3% 9.4 6.7% 1.3%

Tsingtao Brewery Co Ltd 600600 CH NR 33.6 NA 6,310 32.2 29.1 22.3% 13.0 8.5% 1.1%

Beijing Yanjing Brewery Co Ltd 000729 CH NR 6.7 NA 2,763 40.9 34.9 31.2% 14.0 3.4% 0.7%

Royal Unibrew A/S RBREW DC NR 309.5 NA 2,492 20.4 18.4 7.0% 12.6 28.2% 2.9%

Ambev SA ABEV3 BZ NR 18.2 NA 87,078 23.9 20.3 5.9% 11.9 26.0% 4.0%

Simple average (Beer) 23.4 21.4 27.2% 12.0 23.9% 2.5%

Spirits

Diageo PLC DGE LN NR 2,251.0 NA 73,489 21.1 19.2 9.8% 15.1 28.7% 2.8%

Pernod Ricard SA RI FP NR 115.8 NA 34,916 18.4 18.2 10.8% 13.9 11.0% 1.8%

United Spirits Ltd UNSP IN NR 2,551.1 NA 5,724 361.3 52.6 48.7% 29.3 19.4% 0.1%

Remy Cointreau SA RCO FP NR 100.4 NA 5,667 25.9 29.5 -0.4% 18.6 13.0% 1.7%

Davide Campari-Milano SpA CPR IM NR 6.1 NA 8,033 26.5 24.3 31.3% 16.8 13.5% 1.0%

Brown-Forman Corp BF/B US NR 48.2 NA 18,693 28.0 24.5 -1.4% 17.9 49.1% 1.5%

Simple average (Spirits) 80.2 28.1 16.5% 18.6 22.4% 1.5%

Thai consumer/F&B

Thai Union Group TU TB Hold 21.0 24.00 2,943 17.3 14.1 14.6% 13.3 12.6% 2.9%

CP All CPALL TB Add 63.0 68.00 16,621 30.7 26.6 14.0% 9.9 30.3% 1.6%

Big C Supercenter BIGC TB Hold 223.0 216.00 5,403 25.3 24.2 9.4% 13.8 13.7% 1.8%

Charoen Pokphand Foods CPF TB Add 24.8 35.00 5,639 19.1 14.5 -4.9% 11.3 7.4% 3.3%

Ichitan Group ICHI TB Reduce 8.6 7.70 328 21.3 17.5 17.6% 10.5 9.0% 3.4%

Carabao Group CBG TB Add 67.8 71.00 1,990 47.4 33.6 16.0% 28.2 19.6% 1.3%

Siam Makro PCL MAKRO TB NR 35.8 NA 5,035 27.5 24.2 14.4% 15.5 37.1% 2.7%

Oishi Group PCL OISHI TB NR 137.0 NA 754 22.0 19.9 6.9% 13.3 23.2% 2.4%

Sermsuk PCL SSC TB NR 53.0 NA 414 na na na na na na

Simple average (Thai consumer/F&B) 26.3 21.8 11.0% 14.5 19.1% 2.4%

Simple average (All ex-THBEV) 43.3 23.7 18.2% 15.0 21.8% 2.1%

Title:

Source:

Please fill in the values above to have them entered in your report

-

0.20

0.40

0.60

0.80

1.00

1.20

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

22.0x

24.0x

26.0x

28.0x

EP

S

Cu

rren

t co

re P

/E

Current core P/E Average +1 s.d. -1 s.d. Recurring EPS

Average 18.8x

+1 s.d. 22.1x

-1 s.d. 15.5x

Page 7: Thai Beverage Singapore ADD (no change) Consensus · PDF filedistributors to stock up prior to any potential excise hikes. This makes sense ... F&N currently has an 18.74% stake in

Brewers│Singapore│Thai Beverage│July 6, 2017

7

BY THE NUMBERS

SOURCE: CIMB RESEARCH, COMPANY DATA

20.00%

20.42%

20.83%

21.25%

21.67%

22.08%

22.50%

3.10

3.60

4.10

4.60

5.10

5.60

6.10

Jan-13A Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F

P/BV vs ROE

Rolling P/BV (x) (lhs) ROE (rhs)

-50%

-24%

1%

27%

53%

79%

104%

130%

13.0

15.0

17.0

19.0

21.0

23.0

25.0

27.0

Jan-13A Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F

12-mth Fwd FD Core P/E vs FD Core EPS Growth

12-mth Fwd Rolling FD Core P/E (x) (lhs)

FD Core EPS Growth (rhs)

Profit & Loss

(THBm) Dec-15A Sep-16A Sep-17F Sep-18F Sep-19F

Total Net Revenues 172,049 139,153 195,517 206,152 217,470

Gross Profit 50,219 41,562 58,455 62,244 65,659

Operating EBITDA 27,592 22,676 33,202 35,928 37,658

Depreciation And Amortisation (4,400) (3,293) (4,337) (4,563) (4,878)

Operating EBIT 23,192 19,383 28,865 31,365 32,780

Financial Income/(Expense) (1,344) (776) (1,400) (1,400) (1,400)

Pretax Income/(Loss) from Assoc. 7,774 3,375 3,543 3,721 3,907

Non-Operating Income/(Expense) 1,351 697 600 600 600

Profit Before Tax (pre-EI) 30,973 22,680 31,608 34,286 35,887

Exceptional Items

Pre-tax Profit 30,973 22,680 31,608 34,286 35,887

Taxation (4,508) (3,643) (5,332) (5,807) (6,076)

Exceptional Income - post-tax

Profit After Tax 26,465 19,037 26,276 28,478 29,810

Minority Interests (0) (117) 0 0 0

Preferred Dividends

FX Gain/(Loss) - post tax

Other Adjustments - post-tax

Net Profit 26,464 18,920 26,276 28,478 29,810

Recurring Net Profit 22,616 18,920 26,276 28,478 29,810

Fully Diluted Recurring Net Profit 22,616 18,920 26,276 28,478 29,810

Cash Flow

(THBm) Dec-15A Sep-16A Sep-17F Sep-18F Sep-19F

EBITDA 27,592 22,676 33,202 35,928 37,658

Cash Flow from Invt. & Assoc.

Change In Working Capital (8,380) (3,841) (1,880) (1,921) (2,197)

(Incr)/Decr in Total Provisions

Other Non-Cash (Income)/Expense

Other Operating Cashflow 8,275 3,968 2,743 2,921 3,107

Net Interest (Paid)/Received (1,363) (813) (1,500) (1,500) (1,500)

Tax Paid (5,003) (4,314) (5,332) (5,807) (6,076)

Cashflow From Operations 21,121 17,675 27,233 29,620 30,992

Capex (4,065) (2,954) (4,200) (4,200) (4,200)

Disposals Of FAs/subsidiaries

Acq. Of Subsidiaries/investments

Other Investing Cashflow 3,947 2,508 0 0 0

Cash Flow From Investing (118) (446) (4,200) (4,200) (4,200)

Debt Raised/(repaid) (3,813) 2,385 0 0 0

Proceeds From Issue Of Shares

Shares Repurchased

Dividends Paid (15,317) (16,573) (15,765) (17,087) (17,886)

Preferred Dividends

Other Financing Cashflow (1,355) (1,416) 0 0 0

Cash Flow From Financing (20,484) (15,603) (15,765) (17,087) (17,886)

Total Cash Generated 519 1,626 7,267 8,333 8,906

Free Cashflow To Equity 17,190 19,614 23,033 25,420 26,792

Free Cashflow To Firm 22,366 18,042 24,533 26,920 28,292

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BY THE NUMBERS… cont’d

SOURCE: CIMB RESEARCH, COMPANY DATA

Balance Sheet

(THBm) Dec-15A Sep-16A Sep-17F Sep-18F Sep-19F

Total Cash And Equivalents 3,490 5,059 13,826 23,660 34,066

Total Debtors 5,294 3,728 5,425 5,658 5,906

Inventories 35,204 38,145 39,429 41,398 43,672

Total Other Current Assets 4,140 3,171 3,171 3,171 3,171

Total Current Assets 48,128 50,104 61,852 73,888 86,815

Fixed Assets 46,921 47,871 47,734 47,370 46,692

Total Investments 76,998 79,671 79,671 79,671 79,671

Intangible Assets 7,228 7,237 7,237 7,237 7,237

Total Other Non-Current Assets 2,742 2,770 2,770 2,770 2,770

Total Non-current Assets 133,889 137,549 137,412 137,049 136,371

Short-term Debt 8,842 3,495 3,495 3,495 3,495

Current Portion of Long-Term Debt 9,532 15,501 15,501 15,501 15,501

Total Creditors 9,854 9,831 10,931 11,212 11,537

Other Current Liabilities 4,862 3,992 3,992 3,992 3,992

Total Current Liabilities 33,090 32,819 33,919 34,200 34,525

Total Long-term Debt 25,883 27,089 27,089 27,089 27,089

Hybrid Debt - Debt Component

Total Other Non-Current Liabilities 2,958 3,006 3,006 3,006 3,006

Total Non-current Liabilities 28,841 30,096 30,096 30,096 30,096

Total Provisions 820 1,027 1,027 1,027 1,027

Total Liabilities 62,751 63,941 65,041 65,323 65,648

Shareholders' Equity 115,885 120,070 130,580 141,971 153,896

Minority Interests 3,380 3,642 3,642 3,642 3,642

Total Equity 119,266 123,712 134,223 145,614 157,538

Key Ratios

Dec-15A Sep-16A Sep-17F Sep-18F Sep-19F

Revenue Growth 6.2% (19.1%) 40.5% 5.4% 5.5%

Operating EBITDA Growth 0.8% (17.8%) 46.4% 8.2% 4.8%

Operating EBITDA Margin 16.0% 16.3% 17.0% 17.4% 17.3%

Net Cash Per Share (THB) (1.62) (1.63) (1.28) (0.89) (0.48)

BVPS (THB) 4.62 4.78 5.20 5.65 6.13

Gross Interest Cover 17.01 23.84 19.24 20.91 21.85

Effective Tax Rate 14.6% 16.1% 16.9% 16.9% 16.9%

Net Dividend Payout Ratio 57.9% 79.6% 60.0% 60.0% 60.0%

Accounts Receivables Days 8.03 6.39 6.42 7.79 7.79

Inventory Days 103.8 103.0 103.3 102.5 102.3

Accounts Payables Days 14.46 13.17 13.53 14.64 14.61

ROIC (%) 21.3% 17.9% 25.9% 27.6% 28.4%

ROCE (%) 14.5% 11.6% 16.4% 16.8% 16.5%

Return On Average Assets 15.6% 10.6% 14.2% 14.4% 14.2%

Key Drivers

Dec-15A Sep-16A Sep-17F Sep-18F Sep-19F

ASP (% Change) 0.1% -1.8% 1.5% 1.5% 1.5%

Unit Sales Growth (%) 1.3% -26.3% 3.0% 3.0% 3.0%

Utilisation Rate (%) N/A N/A N/A N/A N/A

A&P Expenses (as % Of Revenue) N/A N/A N/A N/A N/A

Excise Duties (litre) N/A N/A N/A N/A N/A

Sales Tax (%) N/A N/A N/A N/A N/A

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If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient are unaffected.

CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker, and issuer and offerer of Derivative Warrants and Structured Note which may have the following securities as its underlying securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions.

AAV, ADVANC, AMATA, ANAN, AOT, AP, BA, BANPU, BBL, BCH, BCP, BCPG, BDMS, BEAUTY, BEC, BEM, BJC, BH, BIG, BLA, BLAND, BPP, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DELTA, DTAC, EA, EGCO, EPG, GFPT, GLOBAL, GLOW, GPSC, GUNKUL, HMPRO, INTUCH, IRPC, ITD, IVL, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LPN, MAJOR, MALEE, MEGA, MINT, MONO, MTLS, PLANB, PSH, PTL, PTG, PTT, PTTEP, PTTGC, QH, RATCH, ROBINS, S, SAWAD, SCB, SCC, SCCC, SIRI, SPALI, SPRC, STEC, STPI, SUPER, TASCO, TCAP, THAI, THANI, THCOM, TISCO, TKN, TMB, TOP, TPIPL, TRUE, TTA, TU, TVO, UNIQ, VGI, WHA, WORK.

Corporate Governance Report:

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.

The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result

Description: Excellent Very Good Good N/A

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.

United Kingdom: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorized and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X7YB. Unless specified to the contrary, this report has been issued and approved for distribution in the U.K. and the EEA by CIMB UK. Investment research issued by CIMB UK has been prepared in accordance with CIMB Group’s policies for managing conflicts of interest arising as a result of publication and distribution of investment research. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), (c) fall within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom subject to relevant regulation in each jurisdiction, or (e) are persons to whom an invitation or inducement to engage in

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investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons.

Where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent “investment research” under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. Any such non-independent report must be considered as a marketing communication.

United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S. registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as “U.S. Institutional Investors” as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds, and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.

CIMB Securities (USA) Inc does not make a market on other securities mentioned in the report.

Neither CIMB Securities (USA) Inc., nor its affiliates have managed or co-managed a public offering of any of the securities mentioned in the past 12 months.

Neither CIMB Securities (USA) Inc., nor its affiliates have received compensation for investment banking services from any of the company mentioned in the past 12 months.

Neither CIMB Securities (USA) Inc., nor its affiliates expects to receive or intends to seek compensation for investment banking services from any of the company mentioned within the next 3 months.

Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Spitzer Chart for stock being researched ( 2 year data )

Thai Beverage (THBEV SP)

Rating Distribution (%) Investment Banking clients (%)

Add 55.9% 5.2%

Hold 30.0% 1.6%

Reduce 10.4% 0.3%

Distribution of stock ratings and investment banking clients for quarter ended on 31 March 2017

1244 companies under coverage for quarter ended on 31 March 2017

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Recommendations & Target Price

Add Hold Reduce Not Rated

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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2016, Anti-Corruption 2016

AAV – Very Good, n/a, ADVANC – Very Good, Certified, AEONTS – Good, n/a, AMATA – Excellent, Declared, ANAN – Very Good, Declared, AOT – Excellent, Declared, AP – Very Good, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Very Good, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – not available, Declared, BCP - Excellent, Certified, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, Declared, BEC - Good, n/a, BH - Good, Declared, BIGC - Excellent, Declared, BJC – Good, n/a, BJCHI – Good, Declared, BLA – Very Good, Certified, BPP – not available, n/a, BR - Good, n/a, BTS - Excellent, Certified, CBG – Good, n/a, CCET – not available, n/a, CENTEL – Very Good, Certified, CHG – Very Good, n/a, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, Declared, DEMCO – Excellent, Certified, DIF – not available, n/a, DTAC – Excellent, Certified, EA – Very Good, Declared, ECL – Good, Certified, EGCO - Excellent, Certified, EPG – Good, n/a, GFPT - Excellent, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Very Good, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Declared, ICHI – Very Good, Declared, INTUCH - Excellent, Certified, ITD – Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Declared, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Declared, M – Very Good, Declared, MAJOR - Good, n/a, MAKRO – Good, Declared, MALEE – Very Good, Declared, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Declared, MEGA – Very Good, Declared, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Very Good, Declared, PLAT – Good, Declared, PSH – not available, n/a, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Declared, RATCH – Excellent, Certified, ROBINS – Very Good, Declared, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI - Good, n/a, SPA - Good, n/a, SPALI - Excellent, Declared, SPRC – Very Good, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, Declared, TCAP – Excellent, Certified, THAI – Very Good, Declared, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Very Good, Certified, TICON – Very Good, Declared, TIPCO – Very Good, Certified, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Good, n/a, TMB - Excellent, Certified, TNR – not available, n/a, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Very Good, Declared, TTW – Very Good, Declared, TU – Excellent, Declared, TVO – Very Good, Declared UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a, WORK – not available, n/a.

Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into:

- Companies that have declared their intention to join CAC, and

- Companies certified by CAC

CIMB Recommendation Framework

Stock Ratings Definition:

Add The stock’s total return is expected to exceed 10% over the next 12 months.

Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.

Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition:

Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.

Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.

Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition:

Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.

Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.

Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.